##### Table of Contents



FORM 10-Q
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 1-10986
 MISONIX, INC.
 (Exact name of registrant as specified in its charter)
 New York
    
    11-2148932(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)1938 New Highway, Farmingdale, NY
    
    11735(Address of principal executive offices)
    
    (Zip Code)
  (Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ
  Outstanding atClass of Common Stock
    
    November 12, 2010Common Stock, $.01 par value
    
    7,001,369




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##### 



MISONIX, INC.
 INDEX
 PagePart I  FINANCIAL INFORMATIONItem 1. Financial Statements:Consolidated Balance Sheets as of September 30, 2010 (Unaudited) and June 30, 2010
    
    
    3Consolidated Statements of Operations Three months ended September 30, 2010 and 2009 (Unaudited)
    
    
    4Consolidated Statement of Stockholders Equity Three months ended September 30, 2010 (Unaudited)
    
    
    5Consolidated Statements of Cash Flows Three months ended September 30, 2010 and 2009 (Unaudited)
    
    
    6Notes to Consolidated Financial Statements (Unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    19Part II  OTHER INFORMATIONItem 1A. Risk Factors
    
    
    20Item 6. Exhibits
    
    
    20Signatures
    
    
    21EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 MISONIX, INC. and Subsidiaries
 
 Consolidated Balance Sheets
 September 30,
    
    
    June 30,2010
    
    
    2010(Derived fromaudited financial(Unaudited)
    
    
    statements)AssetsCurrent assets:Cash and cash equivalents
    
    $
    9,413,437
    
    
    $
    9,900,605Accounts receivable, less allowance for
doubtful accounts of $109,178 and
$123,346, respectively
    
    
    1,920,689
    
    
    
    2,335,653Inventories, net
    
    
    2,919,243
    
    
    
    2,699,717Prepaid expenses and other current assets
    
    
    362,283
    
    
    
    515,427Note receivable
    
    
    920,145
    
    
    
    1,075,105Total current assets
    
    
    15,535,797
    
    
    
    16,526,507Property, plant and equipment, net
    
    
    526,084
    
    
    
    500,215Goodwill
    
    
    1,701,094
    
    
    
    1,701,094Other assets
    
    
    1,465,004
    
    
    
    1,730,339Total assets
    
    $
    19,227,979
    
    
    $
    20,458,155Liabilities and stockholders equityCurrent liabilities:Notes payable
    
    $
    84,491
    
    
    $
    177,679Accounts payable
    
    
    832,940
    
    
    
    888,654Accrued expenses and other current liabilities
    
    
    915,704
    
    
    
    1,000,523Total current liabilities
    
    
    1,833,135
    
    
    
    2,066,856Capital lease obligations
    
    
    10,474
    
    
    
    14,274Deferred lease liability
    
    
    1,404
    
    
    
    Deferred income
    
    
    214,420
    
    
    
    250,739Total liabilities
    
    
    2,059,433
    
    
    
    2,331,869Commitments and contingenciesStockholders equity:Common stock, $.01 par valueshares
authorized 20,000,000; 7,079,169
issued and 7,001,369 outstanding
    
    
    70,792
    
    
    
    70,792Additional paid-in capital
    
    
    25,562,823
    
    
    
    25,502,717Accumulated deficit
    
    
    (8,052,645
    )
    
    
    (7,034,799
    )Treasury stock, 77,800 shares
    
    
    (412,424
    )
    
    
    (412,424
    )Stockholders equity
    
    
    17,168,546
    
    
    
    18,126,286Total liabilities and Stockholders equity
    
    $
    19,227,979
    
    
    $
    20,458,155
 See Accompanying Notes to Consolidated Financial Statements.
  3




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MISONIX, INC. and Subsidiaries
 
 Consolidated Statements of Operations
(Unaudited)
 For the three months endedSeptember 30,2010
    
    
    2009Net sales
    
    $
    3,257,988
    
    
    $
    2,631,017Cost of goods sold
    
    
    1,620,703
    
    
    
    1,621,893Gross profit
    
    
    1,637,285
    
    
    
    1,009,124Operating expenses:Selling expenses
    
    
    965,007
    
    
    
    919,607General and administrative expenses
    
    
    1,217,805
    
    
    
    1,312,680Research and development expenses
    
    
    460,494
    
    
    
    422,469Total operating expenses
    
    
    2,643,306
    
    
    
    2,654,756Loss from operations
    
    
    (1,006,021
    )
    
    
    (1,645,632
    )Other income (expense):Interest income
    
    
    50
    
    
    
    14,025Interest expense
    
    
    (3,641
    )
    
    
    (28,088
    )Royalty income and license fees
    
    
    179,115
    
    
    
    156,623Royalty expense
    
    
    (19,343
    )
    
    
    Other
    
    
    45,409
    
    
    
    10,164Total other income
    
    
    201,590
    
    
    
    152,724Loss from continuing operations before income taxes
    
    
    (804,431
    )
    
    
    (1,492,908
    )Income tax (benefit)
    
    
    38,100
    
    
    
    (245,764
    )Net loss from continuing operations
    
    
    (842,531
    )
    
    
    (1,247,144
    )Discontinued operations:Net (loss) income from discontinued operations net of income tax expense of
$0 and $470,397
    
    
    (175,315
    )
    
    
    527,493Net loss from sale of discontinued operations net of tax of
$0 and $957,937
    
    
    
    
    
    
    (195,716
    )Noncontrolling interest in discontinued operations net of income tax
    
    
    
    
    
    
    20,255Total net (loss) income from discontinued operations
    
    
    (175,315
    )
    
    
    352,032Net loss attributable to Misonix, Inc. shareholders
    
    
    (1,017,846
    )
    
    
    (895,112
    )Net loss per share from continuing operations attributable to Misonix,
Inc. shareholders  Basic
    
    $
    (0.12
    )
    
    $
    (0.18
    )Net (loss) income per share from discontinued operations  Basic
    
    
    (0.03
    )
    
    
    0.05Net loss per share attributable to Misonix, Inc. shareholders   Basic
    
    $
    (0.15
    )
    
    $
    (0.13
    )Net loss per share from continuing operations attributable to Misonix, Inc.
shareholders  Diluted
    
    $
    (0.12
    )
    
    $
    (0.18
    )Net (loss) income per share from discontinued operations  Diluted
    
    
    (0.03
    )
    
    
    0.05Net loss per share attributable to Misonix, Inc. shareholders   Diluted
    
    $
    (0.15
    )
    
    $
    (0.13
    )Weighted Average Shares  Basic
    
    
    7,001,369
    
    
    
    7,001,369Weighted Average Shares  diluted
    
    
    7,001,369
    
    
    
    7,001,369
 See Accompanying Notes to Consolidated Financial Statements
  4




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MISONIX, INC. and Subsidiaries
 
 Consolidated Statement of Stockholders Equity
(Unaudited)
 Three months ended September 30, 2010
 Common Stock$.01 Par Value
    
    
    Treasury Stock
    
    
    Additional
    
    
    
    
    
    
    TotalNumber
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    paid-in
    
    
    Accumulated
    
    
    stockholdersof shares
    
    
    Amount
    
    
    of shares
    
    
    Amount
    
    
    capital
    
    
    deficit
    
    
    equityBalance, June 30, 2010
    
    
    7,079,169
    
    
    $
    70,792
    
    
    
    (77,800
    )
    
    $
    (412,424
    )
    
    $
    25,502,717
    
    
    $
    (7,034,799
    )
    
    $
    18,126,286Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,017,846
    )
    
    
    (1,017,846
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,017,846
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,106
    
    
    
    
    
    
    
    60,106Balance, September 30, 2010
    
    
    7,079,169
    
    
    $
    70,792
    
    
    
    (77,800
    )
    
    $
    (412,424
    )
    
    $
    25,562,823
    
    
    $
    (8,052,645
    )
    
    $
    17,168,546
 See Accompanying Notes to Consolidated Financial Statements.
  5




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MISONIX, INC. and Subsidiaries
 
 Consolidated Statements of Cash Flows
(Unaudited)
 For the three months endedSeptember 30,2010
    
    
    2009Operating activitiesNet loss from continuing operations
    
    $
    (842,531
    )
    
    $
    (1,226,889
    )Adjustments to reconcile net loss to net cash used in continuing
operating activities:Depreciation and amortization and other non-cash items
    
    
    35,972
    
    
    
    87,502Bad debt expense
    
    
    (31,022
    )
    
    
    14,045Deferred income tax benefit
    
    
    
    
    
    
    (243,533
    )Loss on disposal of property, plant and equipment
    
    
    (18,515
    )
    
    
    90,439Stock-based compensation
    
    
    60,106
    
    
    
    32,803Deferred income
    
    
    (36,008
    )
    
    
    (9,651
    )Deferred lease liability
    
    
    1,404
    
    
    
    (6,078
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    425,892
    
    
    
    953,283Inventories
    
    
    (218,969
    )
    
    
    (123,310
    )Income taxes
    
    
    (17,376
    )
    
    
    (107,451
    )Prepaid expenses and other current assets
    
    
    308,857
    
    
    
    (24,424
    )Accounts payable and accrued expenses
    
    
    (6,975
    )
    
    
    94,241Other
    
    
    250,513
    
    
    
    (697,758
    )Net cash used in operating activities
    
    
    (88,652
    )
    
    
    (1,166,781
    )Investing activitiesAcquisition of property, plant and equipment
    
    
    (26,927
    )
    
    
    (118,734
    )Net cash used in investing activities
    
    
    (26,927
    )
    
    
    (118,734
    )Financing activitiesProceeds from short-term borrowings
    
    
    
    
    
    
    6,528,923Payments of short-term borrowings
    
    
    (93,188
    )
    
    
    (7,682,314
    )Principal payments on capital lease obligations
    
    
    (3,557
    )
    
    
    (3,309
    )Net cash used in financing activities
    
    
    (96,745
    )
    
    
    (1,156,700
    )Cash flows from discontinued operationsNet cash provided by operating activities
    
    
    (683,767
    )
    
    
    1,108,945Net cash provided by investing activities
    
    
    405,000
    
    
    
    3,600,000Net cash provided by discontinued operations
    
    
    (278,767
    )
    
    
    4,708,945Effect of exchange rates on cash
    
    
    3,923
    
    
    
    (2,343
    )Net (decrease) increase in cash
    
    
    (487,168
    )
    
    
    2,264,387Cash at beginning of period
    
    
    9,900,605
    
    
    
    3,415,813Cash at end of period
    
    $
    9,413,437
    
    
    $
    5,680,200Supplemental disclosure of cash flow information:Cash paid for:Interest
    
    $
    3,641
    
    
    $
    71,159Income taxes
    
    $
    42,100
    
    
    $
    25
 See Accompanying Notes to Consolidated Financial Statements.
  6




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MISONIX, INC. and Subsidiaries
 
 Notes to Consolidated Financial Statements
 Basis of Presentation
    Organization and Business
    Discontinued Operations
   7




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MISONIX, INC. and Subsidiaries
Notes to Consolidated Financial Statements
   ®
   For the three months endedSeptember 30,2010
    
    
    2009Revenues
    
    $
    
    
    
    $
    4,038,828(Loss) income from discontinued operations, before tax
    
    $
    (175,315
    )
    
    $
    1,018,145Gain on sale of Labcaire
    
    
    
    
    
    
    762,221Income tax expense
    
    
    
    
    
    
    1,428,334(Loss) income from discontinued operations, net of tax
    
    $
    (175,315
    )
    
    $
    352,032
 Reclassification
   8




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MISONIX, INC. and Subsidiaries
Notes to Consolidated Financial Statements
 Net Income (Loss) Per Share of Common Stock
   For the three months endedSeptember 30,2010
    
    
    2009Basic shares
    
    
    7,001,369
    
    
    
    7,001,369Dilutive effect of stock options
    
    
    
    
    
    
    Diluted shares
    
    
    7,001,369
    
    
    
    7,001,369
  Comprehensive Loss
  Stock-Based Compensation
    9




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MISONIX, INC. and Subsidiaries
Notes to Consolidated Financial Statements
   For the three monthsendedSeptember 30,2010
    
    
    2009Risk-free interest rate
    
    
    3.9
    %
    
    
    3.1
    %Expected option life in years
    
    
    6.5
    
    
    
    6.5Expected stock price volatility
    
    
    78.3
    %
    
    
    81.9
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %Weighted-average fair value of options granted
    
    $
    1.49
    
    
    $
    2.02
   OptionsWeightedAverageWeighted
    
    
    RemainingAverage
    
    
    Contractual
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Life
    
    
    IntrinsicShares
    
    
    Price
    
    
    (years)
    
    
    Value (a)Outstanding as of June 30, 2010
    
    
    1,848,510
    
    
    
    4.99
    
    
    
    5.1Granted
    
    
    219,500
    
    
    
    1.82Forfeited
    
    
    (2,000
    )
    
    
    1.65Expired
    
    
    (55,450
    )
    
    
    7.31Outstanding as of September 30, 2010
    
    
    2,010,560
    
    
    
    4.59
    
    
    
    7.1
    
    
    $
    187,170Exercisable and vested at September 30,
2010
    
    
    1,488,160
    
    
    
    5.45
    
    
    
    5.5
    
    
    $
    26,110Available for grant at September 30, 2010
    
    
    741,884
 (a)
    
    Intrinsic value for purposes of this table represents the amount by which the fair value
of the underlying stock, based on the respective market prices at September 30, 2010
or if exercised, the exercise dates, exceeds the exercise prices of the respective
options.  10




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MISONIX, INC. and Subsidiaries
Notes to Consolidated Financial Statements
 Focus Surgery, Inc.
  Income Taxes
   Inventories
  September 30,
    
    
    June 30,2010
    
    
    2010Raw materials
    
    $
    2,335,206
    
    
    $
    1,997,730Work-in-process
    
    
    872,471
    
    
    
    947,924Finished goods
    
    
    261,833
    
    
    
    304,1683,469,510
    
    
    
    3,249,822Less valuation reserve
    
    
    550,267
    
    
    
    550,105$
    2,919,243
    
    
    $
    2,699,717
  11




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MISONIX, INC. and Subsidiaries
Notes to Consolidated Financial Statements
 Accrued Expenses and Other Current Liabilities
  September 30,
    
    
    June 30,2010
    
    
    2010Accrued payroll and vacation
    
    $
    430,868
    
    
    $
    455,052Accrued commissions and bonuses
    
    
    90,000
    
    
    
    245,852Accrued VAT and sales tax
    
    
    25,064
    
    
    
    21,693Accrued professional and legal fees
    
    
    131,018
    
    
    
    24,176Accrued royalty expense
    
    
    114,522
    
    
    
    103,162Foreign income tax payable
    
    
    
    
    
    
    18,676Deferred income
    
    
    24,312
    
    
    
    24,000Current maturities of capital lease obligations
    
    
    14,797
    
    
    
    14,533Other
    
    
    85,123
    
    
    
    93,379$
    915,704
    
    
    $
    1,000,523
 Commitments and Contingencies
  Business Segments
 TM
  12




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MISONIX, INC. and Subsidiaries
Notes to Consolidated Financial Statements
  Medical Device
    
    
    Laboratory and
    
    
    Corporate andProducts
    
    
    Scientific Products
    
    
    Unallocated
    
    
    TotalNet sales
    
    $
    2,692,268
    
    
    $
    565,720
    
    
    $
    
    
    
    $
    3,257,988Cost of goods sold
    
    
    1,219,697
    
    
    
    401,006
    
    
    
    
    
    
    
    1,620,703Gross profit
    
    
    1,472,571
    
    
    
    164,714
    
    
    
    
    
    
    
    1,637,285Selling expenses
    
    
    820,514
    
    
    
    144,493
    
    
    
    
    
    
    
    965,007Research and development expenses
    
    
    381,277
    
    
    
    79,217
    
    
    
    
    
    
    
    460,494General and administrative expenses
    
    
    
    
    
    
    
    
    
    
    1,217,805
    
    
    
    1,217,805Total operating expenses
    
    
    1,201,791
    
    
    
    223,710
    
    
    
    1,217,805
    
    
    
    2,643,306Operating income (loss) from
continuing operations
    
    $
    270,780
    
    
    $
    (58,996
    )
    
    $
    (1,217,805
    )
    
    $
    (1,006,021
    )Net loss from discontinued operations
    
    $
    (175,315
    )
    
    $
    
    
    
    $
    
    
    
    $
    (175,315
    )
  Medical Device
    
    
    Laboratory and
    
    
    Corporate andProducts
    
    
    Scientific Products
    
    
    Unallocated
    
    
    TotalNet sales
    
    $
    2,003,284
    
    
    $
    627,733
    
    
    $
    
    
    
    $
    2,631,017Cost of goods sold
    
    
    1,094,699
    
    
    
    527,194
    
    
    
    
    
    
    
    1,621,893Gross profit
    
    
    908,585
    
    
    
    100,539
    
    
    
    
    
    
    
    1,009,124Selling expenses
    
    
    799,155
    
    
    
    120,452
    
    
    
    
    
    
    
    919,607Research and development expenses
    
    
    336,695
    
    
    
    85,774
    
    
    
    
    
    
    
    422,469General and administrative expenses
    
    
    
    
    
    
    
    
    
    
    1,312,680
    
    
    
    1,312,680Total operating expenses
    
    
    1,135,850
    
    
    
    206,226
    
    
    
    1,312,680
    
    
    
    2,564,756Operating loss from continuing
operations
    
    $
    (227,265
    )
    
    $
    (105,687
    )
    
    $
    (1,312,680
    )
    
    $
    (1,645,632
    )Net income from discontinued operations
    
    $
    151,993
    
    
    $
    200,039
    
    
    $
    
    
    
    $
    352,032
  Three months ended September 30,2010
    
    
    2009United States
    
    $
    2,366,712
    
    
    $
    2,145,054United Kingdom
    
    
    
    
    
    
    742Europe
    
    
    407,673
    
    
    
    247,179Asia
    
    
    83,806
    
    
    
    163,421Canada and Mexico
    
    
    99,162
    
    
    
    51,056Middle East
    
    
    28,034
    
    
    
    Other
    
    
    272,601
    
    
    
    23,565$
    3,257,988
    
    
    $
    2,631,017
  13




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MISONIX, INC. and Subsidiaries
Notes to Consolidated Financial Statements
 Fair Value of Financial Instruments
      September 30, 2010
    
    Carrying Amount
    
    
    Fair ValueCash and cash equivalents
    
    $
    9,413,437
    
    
    $
    9,413,437Trade accounts receivable
    
    
    1,920,689
    
    
    
    1,920,689Trade accounts payable
    
    
    832,940
    
    
    
    832,940Note receivable
    
    
    920,145
    
    
    
    920,145Note payable
    
    
    84,491
    
    
    
    84,491
 June 30, 2010
    
    Carrying Amount
    
    
    Fair ValueCash and cash equivalents
    
    $
    9,900,605
    
    
    $
    9,900,605Trade accounts receivable
    
    
    2,335,653
    
    
    
    2,335,653Trade accounts payable
    
    
    888,654
    
    
    
    888,654Note receivable
    
    
    1,075,105
    
    
    
    1,075,105Note payable
    
    
    177,679
    
    
    
    177,679
  Cash
  Trade Accounts Receivable
  Trade Accounts Payable
  Note Receivable
   14




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MISONIX, INC. and Subsidiaries
Notes to Consolidated Financial Statements
 Note Payable
  Non-financial assets and liabilities
  Goodwill and Intangible Assets
     2011
    
    $
    49,0002012
    
    
    57,0002013
    
    
    52,0002014
    
    
    49,0002015
    
    
    46,000Thereafter
    
    
    260,000$
    513,000
  15




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MISONIX, INC. and Subsidiaries
Notes to Consolidated Financial Statements
 Recent Accounting Pronouncements
     Subsequent Event
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
  Forward Looking Statements
   Net sales : ®
 Gross profit :
 Selling expenses :
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General and administrative expenses :
 Research and development expenses :
 Other income (expense) :
 Income taxes :
 Liquidity and Capital Resources
   Off-Balance Sheet Arrangements
  Other
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New Accounting Pronouncements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
 Market Risk:
  Interest Rate Risk:
  
 Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
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Part II  OTHER INFORMATION
 
 Item 1A. Risk Factors.
  
 Item 6. Exhibits.
 Exhibit 31.1-
    
    Rule 13a-14(a)/15d-14(a) CertificationExhibit 31.2-
    
    Rule 13a-14(a)/15d-14(a) CertificationExhibit 32.1-
    
    Section 1350 Certification of Chief Executive OfficerExhibit 32.2-
    
    Section 1350 Certification of Chief Financial Officer
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SIGNATURES
   MISONIX, INC.
(Registrant)By:
    /s/ Michael A. McManus, Jr.Michael A. McManus, Jr.President and Chief Executive OfficerBy:
    /s/ Richard ZarembaRichard ZarembaSenior Vice President, Chief Financial Officer,
Treasurer and Secretary  21